Block trades in options markets

Block trading, which was sparse before the reduction of the minimum permissible block size threshold in October 2012, currently accounts for about 30% of the trading volume in WTI crude oil options. Block orders share similar characteristics to those routed at the pit, but they have lower information content and face higher execution costs, due to high search costs. However, our results show that such block orders would have been costlier to execute at the pit, which suggests that some pit order flow may have migrated to the upstairs market, contributing to the eventual demise of energy options pits.